scholarly journals The Influence of Cost of Equity on Financial Distress and Firm Value

2018 ◽  
Author(s):  
Anna Sumaryati ◽  
Nila Tristiarini
Keyword(s):  
Financial Distress ◽  
Firm Value ◽  
Cost Of Equity

Buyer’s Bankruptcy Risk, Sourcing Strategy, and Firm Value: Evidence from the Supplier Protection Act

2021 ◽  
Author(s):  
Karca D. Aral ◽  
Erasmo Giambona ◽  
Ye Wang
Keyword(s):  
Operations Management ◽  
Financial Distress ◽  
Firm Value ◽  
Trade Credit ◽  
Treated Group ◽  
Control Group ◽  
Regulatory Change ◽  
Data Set ◽  
Bankruptcy Risk ◽  
Sourcing Strategy

What should a distressed buyer’s sourcing strategy be? We find that this depends on the dynamics in a potential in-court bankruptcy. To establish causality, we use a novel sourcing data set in combination with a unique quasi-natural experimental setting provided by a regulatory shock that significantly strengthened the protection granted to suppliers when a distressed buyer files for bankruptcy: the Supplier Protection Act. We find that, following this regulatory change, the number of suppliers for buyers near financial distress (those most affected by the act, the treated group) increased by nearly 35% relative to financially sound firms (the control group). We also find that this shift allowed distressed buyers to obtain more trade credit, expand inventory holdings, and increase performance, leading to an overall increase in firm value of 7.2%. In turn, these effects led to a sizable reduction in the probability of the affected buyers defaulting and filing for bankruptcy. Our results have important implications for corporate executives: right-sizing the supply base can be critical for buyers near financial distress, and implementing policies to engage and protect suppliers can be the way out of distress. This paper was accepted by Vishal Gaur, operations management.

scholarly journals PENGARUH INTELLECTUAL CAPITAL TERHADAP NILAI PERUSAHAAN DENGAN FINANCIAL DISTRESS SEBAGAI VARIABEL INTERVENING

2020 ◽  
Vol 15 (2) ◽  
pp. 169
Author(s):  
Fivi Anggraini
Keyword(s):  
Real Estate ◽  
Intellectual Capital ◽  
Financial Distress ◽  
Firm Value ◽  
Stock Exchange ◽  
Linear Regression Analysis ◽  
Analysis Data ◽  
Building Construction ◽  
Business World ◽  
Construction Companies

<p><em>Tight competition between companies in the business world in attracting investors is becoming a strong motivation for them to maximize their firm values. This study aims to determine the effect intellectual capital on firm value with financial distress as an intervening variable on real estate and building construction companies listed in Indonesia Stock Exchange in 2014-2018. Sampling method by using purposive sampling with a total   the samples obtained were 40 from real estate and building construction companies listed in IDX. The data was analysed by using multiple linear regression analysis and path analysis. Data analysis was processed with the SPSS 16. The results of this study showed that intellectual capital have significantly negative effect on financial distress. Simultaneously and partially intellectual capital and financial distress have a significant direct effect on firm value. The indirect test results showed that intellectual capital has a significant effect on firm value with financial distress as an intervening variable. </em></p>

scholarly journals Profitability, Liquidity, and Firm Value: Does Financial Distress Have a Mediating Effect?

2021 ◽  
Author(s):  
Melinda Dewi ◽  
Gabriella Natasya Foanto ◽  
Yulius Jogi Christiawan
Keyword(s):  
Financial Distress ◽  
Firm Value ◽  
Mediating Effect

scholarly journals THE DETERMINANTS OF HEDGING AND FIRM VALUE: An Empirical Study in Mining Companies Listed on Indonesia Stock Exchange

2018 ◽  
pp. 104
Author(s):  
Garnis Irawanti
Keyword(s):  
Logistic Regression ◽  
Empirical Study ◽  
Financial Distress ◽  
Firm Value ◽  
Stock Exchange ◽  
T Test ◽  
Corporate Hedging ◽  
Determinant Factors ◽  
Mining Companies ◽  
Derivative Instruments

<p class="Keywords">This study aims to determine the determinant factors in the company's hedging decisions and to determine whether the activities of corporate hedging decisions through derivative instruments provide increased value for the company. The sample consisted of 33 mining companies listed on Indonesia Stock Exchange during 2011-2015 period. The method used in this study is logistic regression and independent sample t-test. The result of logistic regression by using variable of financial distress, underinvestment cost, and size showed a positive correlation to corporate hedging decision. Meanwhile, by using an independent sample t-test found that the company's hedging decisions significantly affect the value of firms and the companies with hedging decision activity through derivative instruments have more superior value than companies by using natural hedging decisions.</p><p> </p>

scholarly journals FAKTOR-FAKTOR YANG MEMPENGARUHI AKTIVITAS HEDGING DENGAN INSTRUMEN DERIVATIF VALUTA ASING

2015 ◽  
Vol 5 (1) ◽  
Author(s):  
Fay Guniarti
Keyword(s):  
Logistic Regression ◽  
Firm Size ◽  
Financial Distress ◽  
Firm Value ◽  
Foreign Currency ◽  
Stock Exchange ◽  
Secondary Data ◽  
Analysis Model ◽  
Growth Opportunity ◽  
Probability Prediction

<p>Penelitian ini bertujuan untuk mengetahui faktor-faktor yang mempengaruhi aktivitas hedging dengan instrumen derivatif valuta asing pada perusahaan non keuangan yang terdaftar di BEI tahun 2010-2012. Data yang digunakan adalah<br />data sekunder yang diunduh dari website Bursa Efek Indonesia. Populasi dalam penelitian ini adalah seluruh perusahaan yang terdaftar di Bursa Efek Indonesia tahun 2010-2012. Sedangkan sampel penelitian ini sejumlah 77 perusahaan yang memiliki eksposur transaksi dan memiliki kelengkapan data untuk diteliti. Dari sampel tersebut sebanyak 28 perusahaan melakukan aktivitas hedging selama periode pengamatan dan 49 perusahaan tidak melakukan aktivitas hedging.Analisis Logistic Regression digunakan untuk menguji hipotesis. Hasil pengujian menunjukkan bahwa model analisis menghasilkan ketepatan 79.2% dan variabel leverage, liquidity, firm size dan financial distress berpengaruh signifikan terhadap prediksi probabilitas aktivitas hedging dengan tingkat signifikansi 5%, sedangkan variabel firm value dan growth opportunity berpengaruh tidak signifikan.</p><p> </p><p>The objective of the study was to know the factors which influence the hedging activity with foreign currency derivative instruments at non-financial companies listed on the Indonesia Stock Exchange in 2010-2012. The data of the research were secondary data which was downloaded from the Indonesia Stock Exchange website. The population of the study was all companies listed in Indonesia Stock Exchange in the period of 2010-2012. There were 77 companies which had the transaction exposure andcomplete data for analysis. From those samples, only 28 companies did hedging activities during the period of observation and 49 companies did not do hedging activities.The data were analyzed by Logistic Regression Analysis to test the hypothesis. The test result showed that analysis model gave the accuracy 79.2% and the research variables; leverage, liquidity, firm size, and financial distress significantly influenced the probability prediction of hedging activity with 5% level of significancy, while the research variables; firm value and growth opportunity did not give significant influence.</p>

scholarly journals The effect of risk disclosure on the cost of equity capital and firm value (An empirical study of manufacturing companies listed on the Indonesia Stock Exchange period 2015-2017)

2019 ◽  
Vol 9 (2) ◽  
pp. 133
Author(s):  
Eka Sri Sumardani ◽  
Rr Sri Handayani
Keyword(s):  
Firm Value ◽  
Stock Exchange ◽  
Equity Capital ◽  
Manufacturing Companies ◽  
Cost Of Equity Capital ◽  
Risk Disclosure ◽  
Cost Of Equity ◽  
Net Profit ◽  
The Cost ◽  
Corporate Risk

This study examines the effect of corporate risk disclosure on cost of equity capital and firm value. It uses the ratio of market value to book value, the ratio of leverage, consumer price index, growth, firm size, independent audit committee, and net profit during the study period and net profit in the previous year as control variables. The population consists of all manufacturing companies listed on the Indonesia Stock Exchange for the period 2015 - 2017. The sample was taken using a purposive sampling method, with the total sample of 99 companies. The data were analyzed using multiple regression analysis to test the hypothesis. The results indicate that corporate risk disclosure has a negative effect on the cost of equity capital but corporate risk disclosure has a positive effect on firm value.

scholarly journals The Structured Hedging of Financial Value: With Applications to Foreign Exchange Risk Management

2021 ◽  
Author(s):  
◽  
Zhenghong Zhu
Keyword(s):  
At Risk ◽  
Risk Management ◽  
Foreign Exchange ◽  
Financial Distress ◽  
Firm Value ◽  
Value At Risk ◽  
Optimal Decision ◽  
Foreign Exchange Risk ◽  
Exchange Risk ◽  
Exchange Risk Management

<p>The objective of the thesis is to develop a structured financial hedging framework that is empirically implementable and consistent with a corporate finance perspective. Value at risk provides a suitable framework for this purpose. The aversion implied in the value at risk and its generalised theory arises from a firm's concerns about contingent financial distress costs, which can be considered as the payoff of a put option written by stockholders of firms in favour of third parties. This enables the development of a hedging framework to explore how a firm's welfare might be enhanced by replacing natural exposures with hedged outcomes. An ideal hedging decision is to maximise the financial value in good times at minimal cost in terms of the generalised value at risk penalty function. In an efficient market, a fully hedged policy using forwards is generally the optimal decision, while alternatives should be taken into account where markets are not efficient. In such cases, the underlying empirical methodology should be able to detect inefficiencies and feed into the objective functions for maximising firm value. The empirical implementation is explored with a variety of econometric methodologies. These include the development of new semi-parametric or nonparametric techniques based upon wavelet analysis, as well as an incomplete forecasting algorithm. Such methods have been preferred to classical linear and stationary models, because they have broader application in an inefficient market where information is technically fuzzy and financial data may exhibit non-linearity or non-stationarity. Further decision dimensions concern exposure duration or path risk, in which individuals' perspectives of risk is time-dependent and linked to the evolution of value at risk through time. The proposed approaches find their main application in foreign exchange risk management, a topic of considerable importance and sensitivity in New Zealand. A statistically well-adapted hedge object for an exporter such as the dairy industry is the corporate terms of trade, which balances up output and expense prices as a single index related to the net profit margin. Further applications are to strategic fund management where the objective is to derive optimal foreign exchange forwards based hedges.</p>

scholarly journals Review of Corporate Governance Practices and Financial Distress Prediction

2018 ◽  
Vol 7 (4.28) ◽  
pp. 30
Author(s):  
Syed Muhammad Hassan Gillani Ahmad ◽  
Suresh Ramakrishnan ◽  
Hamad Raza ◽  
Humara Ahmad
Keyword(s):  
Corporate Governance ◽  
Financial Distress ◽  
Firm Value ◽  
Agency Cost ◽  
Review Of Literature ◽  
Firm Level ◽  
Country Level ◽  
Financial Distress Prediction ◽  
Good Corporate Governance ◽  
Governance Practices

Good corporate governance practices play an import role in increasing the firm value. Based on the agency theory related to corporate governance, if an agent (management) does not protect interest of principal (shareholders) then, agency cost is occurred and this creates a bad impact on the corporate performance. Therefore, it is necessary to address weak corporate governance practices in early stages otherwise firms can go in financial distress and eventually become bankrupt. The objective of this current study is to conduct a nonsystematic review of literature on theories and models related to corporate governance and financial distress. In the light of thorough review of literature, it is found that corporate governance variables (i.e. ownership concentration, board size, board composition, CEO duality, level of independence of board from management and managerial ownership) are good predictors for predicting financial distress. Moreover, it is also found that these corporate governance variables were not only used separately for predicting financial distress but also used along with others variables (firm level and country level) for the purpose of enhancing quality of financial distress models.

Is Financial Distress Value Relevant? – Implications for Multiple-Based Valuation

2020 ◽  
Vol 15 (1) ◽  
Author(s):  
Sabrina Goetz
Keyword(s):  
Financial Distress ◽  
Firm Value ◽  
Peer Group ◽  
Z Score ◽  
Target Firm ◽  
Distress Risk ◽  
Percentage Difference ◽  
Standard And Poor's ◽  
Z Scores ◽  
Relative Valuation

AbstractIn relative valuation peer groups of comparable companies are essential to derive the value of the firm. Valuing a target firm that is in financial distress by using a set of healthy peer group firms probably leads to an overvaluation. We examine whether the financial distress risk has an influence on a company’s value and quantify the discount through financial distress. We identify financial distress by Standard and Poor’s long-term issuer ratings and Altman’s z″-score. We then match the identified firms in financial distress with healthy counterparts that are comparable in value relevant characteristics, i. e. profitability, risk, and growth, to estimate the percentage difference in valuation multiples. Using rating information, in every year almost half of the companies are in financial distress whereas by Altman’s z″-score about 20% of the companies in the sample are in financial distress. We find that the discount caused by financial distress makes up about 4–7% of firm value. The discount increases for lower rating classes and lower z″-scores. Besides the degree of financial distress, market downturns as the financial crisis affect the distress discount.

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